Back-To-School Shoppers Open Wallets, But Carefully

After months of sitting on their wallets, Americans went shopping in July. The uptick reported Tuesday is boosting economists' hopes for a reasonably strong back-to-school season. And retailers are looking for clues about how the holiday shopping season will turn out later in the year.

"This is a good report," Chris Christopher, an economist with IHS Global Insight, a forecasting firm, wrote in an assessment of the latest report. "It indicates that consumers came back after hunkering down" during the year's first half when sales were "dismal."

The Commerce Department said Tuesday that retail sales rose 0.8 percent last month, marking the single biggest gain since February. About two-thirds of all U.S. economic activity involves consumers, so any shopping increase is welcome news, especially for merchants.

With the back-to-school shopping season moving into its peak now, "retailers are seeing positive signs that consumers are spending," National Retail Federation President Matthew Shay said in a statement.

The recent surge in gasoline prices could yet dampen sales of jeans, laptops, lunchboxes and backpacks. Gas prices have jumped 30 cents a gallon in the past month, pushing the national average to $3.70, according to AAA, the auto club.

And three years into a recovery, the unemployment rate is still running at a painful 8.3 percent. All of that continues to dampen consumer confidence and spending.

"Americans are not throwing caution to the wind," Christopher said. "Robust and enduring consumer spending growth will happen once job prospects improve and consumer confidence jumps out of recession territory."

Lisa Mizer, mother of two grade-school students in Twinsburg, Ohio, said she is willing to spend a bit, but not to fill her shopping cart at a time when the job market remains so weak. "We're all still just in a holding pattern," she said.

Her children need a few new clothes to head off to class, but "they don't need long pants and winter coats and things like that until farther in the school year. So even though they're in the stores now, we're not buying them yet."

For retailers, the back-to-school sales period is the second most important shopping season of the year, after Christmas. Moreover, retail sales in late summer often are key predictors of how those holiday sales will turn out.

Despite continuing concerns about the job market and higher fuel prices, retailers are somewhat optimistic this year. For one thing, there may be a lot of pent-up demand for goods. Consumers who have resisted shopping sprees for years may decide to go ahead and replace outdated electronics, ripped-up backpacks and too-small coats.

And there's another reason for retailers to be hopeful: simple math. Schools are adding lots more students this year.

That's because the country saw a population boom from 2003 to 2007. In that peak year of 2007, about 4.3 million babies were born — up from 4 million born in 2002. This baby boom coincided with the housing boom. As people were moving into bigger houses before the mortgage crisis hit, they were having more babies to fill up those new bedrooms. Now, their children are entering kindergarten and grade school.

As a result, back-to-school spending is expected to rise this year by 14 percent, to about $689 per family for clothes and goods including electronics, according to the National Retail Federation, the biggest trade group for merchants. That would be the fastest pace of growth since the survey began in 2003.

If that estimate turns out to be correct, that would bring back-to-school sales for the K-12 customers up to $30.3 billion. The trade group based its estimates on polling involving 8,509 consumers, interviewed July 2-9.

College enrollment also has been hitting record levels, with total enrollment around 21 million people. The mass movement into college classrooms comes as economists say more education means more job opportunities. For retailers, that could mean more people will be buying everything from sophisticated computers to beanbag chairs.